The intense geopolitical confrontation between the US and Russia is far from limited to diplomatic spats and contentious no-fly zones. The two nations are also clashing to conquer the global market share in the production and exports of oil and natural gas, a conflict that has been bubbling with remarkable fervour since the expansion of the production of shale gas in locations such as the Permian Basin and Marcellus Shale, whose overall production has been so strongly resilient that it has caused a significant impact in the global market. This time, Russia may again come under fire as Washington once more begins its quest to wean Europe away from its strong dependence on Moscow’s energy imports.
The Trump administration has carried out the President’s campaign promises to ramp up domestic oil and gas production, sweeping aside constraining environmental roadblocks that the Obama administration had put in place. Vis-a-vis the energy clash with Russia, President Trump recently announced that he wanted to make the U.S. an energy exporter to nations in traditional Russian spheres of influence – he intends to use his nation’s expanding Natural Gas exports to reduce reliance on Russian energy (and therefore Russian influence) in nations such as Poland, Austria, Hungary, Latvia and Estonia.
This new confrontation is not about to simmer down; we are talking about the top two natural gas producers (although the bulk of the U.S. production is through hydraulic fracturing or fracking), who are engaged in an ever-escalating geopolitical struggle. Added into the mix are the other 2 highly geopolitically relevant gas exporters and producers, the Islamic Republic of Iran and Qatar. The sanctions and blockades against these exporters, however, could well turn to be beneficial for the energy strategies of both the U.S. and Russia – namely, to gain market share in European and Asian markets. OPEC members seem unlikely to influence this confrontation, given the fact that they have lost significant control of prices. Much will depend on the operational issues of both energy competitors, such as their long term reserves, ratio of reserves to production – as well as social, political, financial and economic stability in the long term.
However, at least in Asia and the MENA region, Russia may have already established dominance due to the backwardness of the Obama administration in many of these geopolitical hotspots – this reticence to involve the US has allowed Russian premier Vladimir Putin to gain important leverage in the MENA. Washington did, however, keep Russia from expanding further into European markets by way of long standing sanctions, which remain in place. Their focus is now aimed at finding important market niches in Asia – especially in China and India.
It’s also important to underscore the close alliance in the energy sector that Russia has developed in the last two decades with a once traditional ally of Washington, Venezuela. Moscow currently has a wide variety of deals in place with ROSNEFT, the most prominent foreign state oil company. This has allowed for Russian involvement in the most important projects and production ventures with the Venezuelan state oil company PDVSA, as well as becoming an important shareholder of CITGO, a subsidiary of PDVSA, in Houston. This is something which has caused concern in the Trump administration, raising the spectre of a Russia-owned oil company operating on U.S. soil. So far, aside from China, Russia has become the most reliable partner of Venezuelan oil and gas ventures. They have replaced the once massive presence of U.S. and European oil companies before their removal as a result of the Bolivarian Revolution, with all its’ socialist and anti-imperialist rhetoric.
But all this might be about to change. If the current Trump administration plays it’s cards cleverly regarding the current U.S. position with Europe, perhaps a renewed and rekindled U.S. leadership role in Europe will be determined by the support of nations in the ‘New Europe’ – former Soviet satellites like Poland, Lithuania, Ukraine. These nations are eager to import greater quantities of U.S. LNG, as well as alternative sources of natural gas. This may be mirrored in MENA region – renewed U.S leadership could be determined, not by traditional allies, but by some rising states, which may prove to be dependable allies in regional affairs – nations such as Oman, or possibly Bahrein.
In the end, the U.S. future leadership in the energy field will be defined and determined by its way of handling global geopolitics – especially when it comes to deal with a strongly resilient Putin-led Russian Federation, which has been known to handle its most powerful export – energy – as a geopolitical weapon.